The Abbott government has urged the Fair Work Commission to take a softening economy and labour market into account as the industrial umpire reviews modern awards.

The government's strongly worded submission to the commission suggests the government has heard business concerns, particularly from the retail and hospitality sectors, about the impact of penalty rates on employers' ability to operate.

The Fair Work Commission's review, which begins before a full bench on Wednesday, is the most comprehensive review of the modern awards system since the introduction of the Fair Work Act in 2009. The review will allow the commission to make decisions on whether minimum pay and conditions should be varied across the 122 modern awards which cover most Australian employees.

In its submission to the review, the Department of Employment warns the ''softening economic environment and labour market should be carefully considered by the commission during the review. In particular, the commission should consider the impact of employment costs on employers' decision to hire workers over the next four years.

The government also urges the commission to consider whether extra pay for working particular times of the day was ''appropriate in a particular industry'' and acknowledged the review may lead to ''significant changes'' to the modern award system.

The submission comes only days after the Abbott government singled out the conditions of workers at companies including SPC and General Motors Holden as a reason not to provide additional government assistance.

The Coalition promised before the election not to make any legislative changes to the Fair Work Act, but the submission comes as a further sign that the federal government is prepared to back a push by business to reduce operating costs.